Reinventing the telco: Embracing a ‘puretone’ approach

Reinventing the telco: Embracing a ‘puretone’ approach
  • Insight
  • May 30, 2024

The path towards business model reinvention starts with clear separation and focus for the array of models nested within an integrated telco.

by Matthew Duffey, Florian Gröne, Russell Taylor and Junis Rindermann

Although pressure to reinvent business models is building in all industries, telecoms companies find themselves in the eye of the storm. Average returns on invested capital achieved by large telcos have declined sharply over the past decade, and there’s little prospect of a rebound any time soon. As PwC’s Perspectives from the Global Telecom Outlook 2023–2027 report highlights, the industry is entering a phase in which revenue growth and optimisation opportunities will be muted, and in which it will be harder to earn back the cost of capital, especially while interest rates remain elevated.

Industry leaders know they have a problem. In PwC’s 27th Annual Global CEO Survey, 52% of telecom CEOs said they believe their company will no longer be economically viable in ten years if it continues on its current path (that share is up seven percentage points over the previous year and higher than the 45% average among CEOs across all industries).

So, what is to be done? Business model reinvention means radically transforming how a company creates, delivers, and captures value—in other words, fundamentally changing how it makes money, serves customers, and provides new products or services. Looking across the telecom sector, we see a number of new-breed business models at play as incumbents move to reinvent themselves and attackers challenge the status quo. Take, for example, the anything-as-a-service (XaaS) players providing the full stack of services that brands need to launch fixed or mobile consumer franchises. Or consider the network orchestrators serving large enterprise customers by combining wholesale capacity from across multiple operators.

The common thread is that these new models are typically tightly focused ‘puretone’ businesses, in contrast to the complex multitone models of integrated telcos. For integrated players, the reinvention journey starts with adopting a puretone mindset. This means taking a hard look at the performance and value of the multiple businesses currently nested within the integrated whole.

The honest truth is that integrated telcos today combine an array of diverse activities, each of which requires distinct management skills, has its own capital requirements, and operates on a unique planning horizon. Private investors previously recognised that value can be unlocked by transferring components of the integrated business model into more focused entities—a process that started in the late 1990s with the creation of TowerCos to own and operate passive network infrastructure. This same logic is now just as relevant for active digital infrastructure such as fibre networks or data centres.

To be clear, by arguing for a puretone approach, we are not calling for the break-up of vertically integrated carriers, although some may choose this path. Our recommendation, rather, is that telcos reconfigure their business unit and functional structures to create clearer organising logic around different models. Clearer separation and interfaces among them will reveal the true economics of each and new potential for value creation. The goal is a coherent portfolio with each unit anchored on a clear purpose and value proposition, and supported by winning combinations of assets, capabilities, ecosystem relationships, and leadership.

Dissecting the integrated telco

What types of assets and capabilities can underpin a puretone telecoms business? Virtually any of the components that integrated telcos today combine under one roof—from from running sophisticated digital networks to selling consumer subscriptions to supporting enterprise customers with software and services—can become a standalone business.


Running these diverse businesses within a single telco presents management challenges. They have vastly different needs when it comes to investment, economic planning/return horizons, talent, technology, sales channels and customer interfaces. To give a tangible example, try to imagine a single capital planning process that can account for the radically divergent economics of direct-to-consumer subscription services, a B2B systems integration business, and foundational network investments.

Given such conflicts within the integrated structure, a major advantage of puretone models is greater clarity around managerial purpose and performance. Leaders can focus on a more select and manageable set of levers to drive performance, and on a smaller set of KPIs to ensure that each business is assessed on its merits and against a more relevant competitive set.

Crucially, they can also configure capabilities and resources to support this single-purpose value creation recipe (we call this capabilities-driven strategy) while cutting elements that might distract from this focus (through fit-for-growth spending management). Such alignment among strategy, capabilities and investment is the foundation of enduring competitive advantage. It’s also a strong position from which to explore new market opportunities, some of which may have been dismissed previously because of inherent tensions within the integrated model.

From an investor perspective, puretone businesses are easier to match against investment objectives. For example, infrastructure funds typically look for relatively simple, passive assets with high capital intensity and predictable returns, whereas private equity investors are better suited to more complex situations that provide greater scope for creating value through operational improvements and strategic moves such as divestments or bolt-on acquisitions. Looked at through this lens, puretone business models offer greater optionality to investors.

In contrast, the economics of the vertically integrated business model have become increasingly challenging. This is reflected in a ‘conglomerate discount’ seen in the EBITDA multiples across the sector. Although integrated carriers own significant fixed-asset infrastructure, they typically carry valuations similar to retail or ‘asset-light’ operators. Higher multiples would likely be applied to the entities owning the fixed assets if they were spun out.


This combination of commercial and capital markets factors has fuelled a lively mergers-and-acquisitions market. Looking at recent deals, we see several distinct themes playing out, including combinations of integrated telcos (e.g., the merger of T-Mobile US and Sprint); active infrastructure carve-outs and combinations (e.g., TDC Group’s split into TDC Net and Nuuday); passive infrastructure carve-outs and combinations (e.g., American Tower’s sale of its India operations); and deals within and across adjacent sectors (e.g., BT Group spinning off BT Sport into a 50/50 joint venture with Warner Bros. Discovery).

What stands out is that the old notion that telcos ultimately needed to choose between owning networks and serving customers has become more nuanced even as delayering has gained momentum. Although the logic of value creation will continue to pull apart vertically integrated telcos, there are many possible paths forward.

Telco models for the future

Looking ahead, we see the puretone businesses of the future coalescing around five principal models. We offer this five-model typology as a thought starter, not a prescription. As noted previously, every telco will need to find its own unique answer to the question of how best to create, deliver and capture value. The road to reinvention is not linear. Please click the tabs below for a detailed description and examples of each model.


Essentially specialist real estate businesses, PropCos own a portfolio of physical property and/or passive telecoms infrastructure and maximise utilisation across it. Unlike captive owners of these assets within an integrated telco, independent PropCos can increase utilisation by selling access to multiple tenants. According to market intelligence provider TowerXchange, more than 75% of towers worldwide are now managed independently of integrated telcos. Beyond buying towers and buildings, PropCos may choose to grow by diversifying into ownership of multiple asset types, such as local exchanges and data centres, and evolve into an InfraCo business model requiring new capabilities.

Key assets/capabilities: Access to capital, expertise in managing passive network assets, tenant management

Examples: American Tower (US), Cellnex (Spain), Helios Towers (Africa), Indara Digital (Australia), Indus Towers (India), TAWAL (Saudi Arabia), Vantage (Germany)


NetCos and UtilityCos own and operate active infrastructure and sell network capacity wholesale. Their business model differs from InfraCos by including standing up capital- and labour-intensive field operations and network operations centres (NOCs) and operating a broadband network grid. This full suite of network elements may be shared across multiple PlatformCos, ServeCos and SolutionCos to increase asset utilisation and economic value. Looking forward, NetCos have opportunities to offer other services, such as data centres and edge computing, and even distributed energy generation to power them. The challenge for NetCo leadership teams is to imagine how synergies—across sites (cell towers, rooftops), rights-of-way (‘permit and dig once, deploy multiple grids’) and workforce (a combined field force)—could create value in adjacent markets.

Key assets/capabilities: Access to capital, ownership and expertise in active network operations

Examples: BT Openreach (UK), CETIN (Czech Republic), NBN (Australia), TDC Net (Denmark)


PlatformCos and BrokerCos orchestrate and sell white-labelled digital services, typically on an XaaS model. Examples in this diverse category include network orchestrators that facilitate wholesale buying and/or selling of capacity among other digital infrastructure providers and enterprise customers; platforms that provide network management functions (e.g., NOC and operational support systems) and provisioning/billing engines; and xVNE players (network enablers) that provide a full stack of software and services to brands looking to launch fixed or mobile virtual network operators (xVNOs).

Key assets/capabilities: Digital infrastructure integration and deployment, network service operations, multi-infrastructure/multi-service orchestration, commercial operations

Examples: Elisa Polystar (Nordics), Jio Platforms (India), Singtel Paragon (Singapore), Vitroconnect (Germany)

The RetailCo/ServeCo business model centres on monetising network services by selling subscriptions for relatively simple digital and connectivity services directly to consumers and small businesses. This category includes asset-light fixed or mobile virtual network operators and companies operating physical retail outlets or contact centres. The next growth horizon for ServeCos is to offer a wider array of consumer subscriptions and digital commerce—for example, in entertainment, education, embedded finance, smart home, or digital health and wellness. The winners will be players that create strong ecosystem partnerships across sector boundaries while earning the trust to ‘super-serve’ consumers.    

Key assets/capabilities: Marketing, sales/distribution, commercial operations (including pricing, channel/yield management and customer service)

Examples: Boost Mobile (US), Freenet (Germany), Lebara (UK), Lycamobile (UK), Nuuday (Denmark)

SolutionCos apply engineering, systems integration and software expertise alongside professional services to create bespoke internet-of-things solutions, private networks, neutral host networks, and related technology services. Clients include corporations, municipalities, entertainment venues and smart communities. Consider, for example, an industrial client that requires a secure private network combining sensors, data management, on-premise central and edge cloud data processing, artificial intelligence, and process orchestration software. As technology matures, SolutionCos may evolve towards managed services–type models, in which solutions are modular, standardised, deployed across multiple clients, and operated at scale using repeatable engineering patterns, AI and automation.  

Key assets/capabilities: Project development, enterprise solution sales, and the ability to design, integrate, deploy and operate solutions for a single tenant or multiple large-scale tenants

Examples: Boldyn Networks (UK/IE), Federated Wireless (US), Orange Business (France), Telefónica Tech (Spain), T-Systems (Germany)

Laying the foundations

Although the right destination will vary, the first step is the same: gaining a clear view of the business model architecture and economics that constitute the integrated model. Few telcos have this today. In our experience, the true non-subsidised performance of most components remains opaque, even as a minority (SolutionCo-type businesses, for example) are separated out internally.

The way to cut through this fog is to define and demarcate each part of the business clearly with its own specific role and KPIs, joined through internal accounting, performance management, and capital allocation disciplines. Leaders can then see which elements of the portfolio are contributing value and which are eroding it. The executives running each business can be rewarded more directly for performance. And resource allocation decisions can be guided by actual returns on invested capital and measured in more transparent ways.

Armed with the more granular view of how the integrated whole creates value, leaders can decide on strategic moves to enhance shareholder returns. One set of options will consist of organic actions to drive profitable growth in specific business units, using a zero-based approach and transformation cost structures. Another set of options is made up of inorganic actions for each business, including consideration of potential alliances with strategic investors and dispassionate consideration of whether the company remains the ‘best owner.’

Crucially, breakup of the integrated telco is not the inevitable endpoint of this approach. Although deals between congruent players may make economic sense, experience shows that deal-making is often messy, complex and costly. As we noted earlier, the pathway to a puretone future will not be linear or the same in every market. Differentiating factors include the unique business mix and capabilities of each player, the growth rates and competitive dynamics of each market, and the evolving approach of regulators in different jurisdictions.

How will regulators view delayering and the emergence of puretone competitors? To the extent that delayering weakens the traditional market power of infrastructure owners, it may be viewed as strengthening competition and consistent with the trends of liberalising network access by regulators since the 1990s. However, regulatory perspectives today differ enormously across markets, and we see this as likely to continue (see sidebar, ‘Regulation for a puretone world,’ for more).

The attitude of regulators remains an area of deep uncertainty as telecom executives and investors consider their options for value creation through moves towards puretone business models.

In most countries, the regulatory conversation remains focused (as it has been since the 1990s) on having enough integrated operators to guarantee viable competition. Regulators tend to be cautious about consolidation as likely resulting in higher prices for customers. The drawback of this focus—evident in some European countries during rollout of 5G—is that the resulting four to five integrated players may lack sufficient scale and returns on capital to accelerate investment in digital infrastructure, which potentially threatens national competitiveness.

The disaggregation of integrated telcos into puretone competitors could potentially change the terms of debate. One can imagine, for example, a market in which multiple ServeCos and SolutionCos compete hard and innovate to win customers while leveraging shared infrastructure owned by a small number of large NetCos. In theory, such an alternative structure would give regulators a more nuanced set of tools. By setting different rules for different types of players, they could unlock new ways of reconciling seemingly divergent regulatory objectives: competition, consumer choice, and fair pricing; capital efficiency, rapid infrastructure investment, and innovation; and national sovereignty over critical data infrastructure.

It is impossible to know whether, which or when regulators will endorse such lines of argument. The only certainty is that the regulatory landscape remains heterogeneous. At this point, our best guess is that the puretone logic will gradually win adherents among regulators. For their part, executives and investors can shape the outcome by continuing to make the case for puretone business models on their merits while encouraging meaningful debate about how better outcomes could be achieved for all stakeholders.

Reconfiguration around puretone business models is not, of course, the only lever available for integrated telcos to boost future value, competitiveness and growth. Recently, we identified seven urgent innovation priorities for telecom CEOs, of which reinventing business models is one. However, an awareness of—and readiness to embrace—puretone logic should be at the heart of every telco strategy, focusing the attention of leaders on real sources of growth and competitive advantage while unlocking value for investors.


Matthew Duffey

Matthew Duffey, Global Business Model Reinvention Leader, is a principal with PwC US.

Dr. Florian Gröne

Dr. Florian Gröne, Global and EMEA Telecommunications Industry Leader, is a partner with PwC Germany.

Russell Taylor

Russell Taylor, UK Telecommunications Industry Leader, is a partner with PwC UK.

Dr. Junis Rindermann

Dr. Junis Rindermann, based in Munich, is a director with PwC Strategy& Germany.

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